Criterion: Car dealers are booming as consumers embrace that new car lustre

• New car sales rebounded in September, thanks to proliferating brands and robust consumer confidence
• Investors have applauded Eagers Automotive’s $1 billion foray into the Canadian market
• While well short of federal government targets, EVs and hybrid cars account for a higher proportion of sales 

Having dropped into the pit stop for a tune-up, the automotive sector is motoring along nicely thanks to an influx of affordable brands and more balanced supply and demand.

A semi-discretionary purchase, car sales have benefited from resilient consumer confidence and rising housing prices.

The latter won’t put spending dollars in people’s pockets. But there’s a strong historical link between peppy property prices and homeowners flocking to the showroom.

Interest rate reductions have provided not just relief to consumers but have reduced the cost to dealers of financing their showroom floor plans.

According to Macquarie Equity’s take on the official stats, September new car sales rose 7% year on year, to 106,700 units.

That’s the biggest month-on-month increase year to date, with June half to date volumes up 4.4% compared with a previous 4.9% decline.

But investor interest has focused on Eagers Automotive (ASX:APE) , the country’s biggest car dealer group, for a different reason.

Recognising the good times don’t last, Eagers has expanded offshore with the $1 billion purchase of 65% of a leading Canadian dealership, Canada One.

Global forays are unusual for dealerships, which to date have preferred the home and hearth comfort of the local market.

EVs, hybrids spark interest

The industry stats show some interesting sub-trends.

One is the improvement in electric and hybrid vehicle sales. This was spurred by the influx of affordable Chinese brands such as BYD, GWM, Chery and MG (all of which are top 10 sellers).

In calendar 2025 to date, electrics and hybrids (plug-in and otherwise) accounted for 27.5% of sales, compared with 23.3% in calendar 2024.

The rise of special utility vehicles (SUVs) is unabated, with this category accounting for 60% of sales compared with 50% five years ago.

The luxury sector has outperformed, which shows that that not everyone is ruffled by cost-of-living pressures.

Eager to please in offshore foray

Investors have applauded Eagers’ maple leaf foray, which elevates the company to a top five global dealer group. The shares have risen 23% in the last month and have almost tripled over the last 12 months, ascribing a heady market cap of $9.3 billion.

The Canadian market is 1.6 times bigger than Australia’s. With 36 brands competing compared to 75 here, it’s a lot less competitive.

The cash-scrip deal is structured so that Canada One founder Pat Priestner remains highly involved – and motivated.

Given its robust performance Eagers was in a strong position to drive a strong deal –  although not necessarily a bargain.

Back up the Audi behind the Merc

The $700 million market cap Autosports Group (ASX:ASG) owns upmarket franchises including Rolls Royce, Lamborghini and the obscure Alpina (bespoke BMWs).

Broker Canaccord notes that Autosports’ brands recorded an 18% increase in September, led by Audi’s 55% jump.

This reflects a “more favourable supply demand dynamic”. This is likely to translate to improved gross margins on new vehicle sales.”

Autosports reported full year revenue of $2.86 billion, up 8% but underlying earnings declined 18% to $167 million.

The owner of plebian and premium marques, Peter Warren Automotive (ASX:PWR) reported flat full-year revenue of $2.48 billion. Pre-tax profit fell 60% to $22 million.

This in part was due to “very low margins on specific brands”.

But the trends are improving and management expects an earnings uptick this year. Investors do so as well, with Peter Warren shares lifting more than 20% in the last six months.

Autosports shares have doubled over that period.

More tiger in the tank

The shiny showroom is only one link in the complex automotive chain.

For a start, dealers make a motza from parts and service.

A rising automotive tide also lifts the fortunes of after-market component suppliers ARB Corporation (ASX:ARB) and Amotiv (ASX:AOV) .

Four-wheel drive accessorist ARB has long been a market darling and its recent numbers didn’t disappoint.

The owner of chains including Autobarn and Repco, Bapcor (ASX:BAP) has struggled and last year’s rejected takeover offer from Bain Capital looks better by the day.

Generally speaking, the sector looks to have more tiger in the tank. But the players on the hoist for running repairs could miss out.